Religious Organizations

Religious Organizations

The Challenges Faced by Religious Organizations Today

Like all nonprofits, dioceses, religious congregations, private schools, institutions, and foundations (collectively, “Religious Organizations”), must operate in an environment of increasing regulation and scrutiny. However, because of their religious identities, the law places Religious Organizations in a special category where their activities and integrity are protected under the Religion Clause of the First Amendment to the U.S. Constitution and similar provisions of state constitutions. Depending on the Religious Organization’s particular religious tradition, there may be internal religious laws and regulations that affect the Religious Organization’s activities in the secular arena. Thus, to be effective, legal counsel for Religious Organizations must have expertise in the various laws and regulations generally affecting nonprofits and understand the extent of the constitutional protections afforded to religious nonprofits. Counsel also must be sensitive to the requirements of applicable religious laws, regulations, and/or governing principles.

What We Can Do to Help

Entity Formation/Restructure. The Firm advises Religious Organizations on how best to form or restructure their enterprises for efficient governance consistent with civil and religious requirements and on qualifying as a 501(c)(3) or other qualifying tax-exempt organization. Moreover, the Firm counsels on the protection of capital assets and charitable donations for the benefit of Religious Organizations and their donor base. Isolating highly exposed liability areas, particularly personnel, into entities that are separate from the organization’s major capital assets is a key element of any restructuring plan. This approach also protects the bishop, chief priest, presiding elder, pastor, or other presiding officer of the Religious Organization from personal liability, which may apply if the Religious Organization employs the “corporation sole” ownership model currently permitted under the laws of several states. A key objective is to ensure that the restructuring creates a governable corporate structure that is easily administered given the limited amount of tax and legal expertise available, especially at the local (e.g., parish, congregation, etc.) level. We also provide staff training to ensure that the distinct entities are respected, with separate bank accounts, books and records, minutes of members and directors, and that the appropriate officers and staff are appointed to administer these matters.

The Firm advises on taxable and tax-free bond financing for Religious Organizations, particularly in the area of schools. The Firm has represented nonprofit and for-profit entities in numerous financial transactions, including loans secured by real estate or other assets and both secured and unsecured lines of credit. Legal, tax, accounting and financing counsel are available. A Firm affiliate, Busch Financial Services, has provided counsel and placement on over $500 million of taxable and tax-free financing.

Tax Planning & Compliance. The Firm’s attorneys/CPAs can advise and assist Religious Organizations with a full range of tax planning and compliance issues, including state and federal tax exemptions, annual reporting and disclosure filings, unrelated business income tax issues, First Amendment and political activity tax issues, tax incentives, and tax benefits for members of the clergy, religious orders or institutes, etc. Federal and state tax laws and regulations present a compliance minefield for Religious Organizations. The Firm’s experienced tax counsel and service help Religious Organizations avoid potentially disastrous consequences, including the loss of tax-exempt status and/or the assessment of interest and penalties.

Charitable Giving. The Firm has extensive experience in the creation and operation of inter vivos and testamentary charitable instruments that name Religious Organizations as beneficiaries. This includes advising Religious Organizations and their development departments on the charitable remainder trusts, charitable lead trusts, retained life interests, charitable annuities, donor-advised funds, and other revocable and irrevocable charitable gifts. Please note that the Firm does not provide investment or asset management services.

Real Estate. The Firm advises Religious Organizations on a variety of real estate matters, including real estate acquisitions and sales, assisting with entitlements for Religious Organizations, including zoning, building permits, and other land use matters, construction and development of religious schools and other religious facilities, lease agreements and related issues.

Business Transactions. The Firm advises Religious Organizations on a variety of business matters and transactions, including mergers and acquisitions, formation of partnerships and joint ventures, licensing agreements, and commercial contracts for goods and services.

Roman Catholic Organizations. Although the Firm has experience advising Religious Organizations from a variety of religious traditions, the Firm has particular expertise representing Religious Organizations in the Roman Catholic tradition. The scrutiny of Religious Organizations, especially Roman Catholic dioceses and related institutions, has been particularly intense because of continued fallout from the sexual abuse scandals and associated litigation. The Firm is keenly aware of the unique issues that Roman Catholic dioceses face when they consider changes to their corporate structure and governance. The restructuring analysis (and any restructuring plan ultimately adopted) must carefully balance the requirements of civil law (especially as they pertain to the limitation of liability) and the unique precepts of canon law, which specifically regulate how the bishop governs and administers temporal goods within his diocese.